Park Pointe developer files for bankruptcy

November 10, 2009

By Warren Kagarise

Long-planned development is stalled again

The developer behind the troubled Park Pointe project filed for Chapter 11 bankruptcy protection last week, just before the Tiger Mountain land where the development would rise headed to a foreclosure auction.The project developer, Wellington Park Pointe LLC, filed for bankruptcy protection Nov. 2 as the company worked to restructure a loan from Regal Financial Bank. The developer failed to make payments on a loan from the Seattle-based bank and in June defaulted on nearly $12 million. Wellington held $29 million in assets, but owes about $15 million, court filings show. The filing in U.S. Bankruptcy Court in Tacoma halted the planned Nov. 6 foreclosure auction.

Park Pointe developers envisioned hundreds of homes on 67 forested acres on the west slope of Tiger Mountain, behind Issaquah High School. Developers proposed Park Pointe in the mid-1990s, but the project withered amid community opposition, zoning changes and a tough construction climate.

The long-planned project has received renewed attention since last fall, after city officials proposed a complex development-rights swap to preserve the Park Pointe property. The proposed development deal and recent reports about how Park Pointe would impact the environment generated interest in the project, too.

Neal Wolf, a Chicago attorney representing Wellington, said he was hopeful the company and the bank could reach a deal on debt reorganization and restructuring, and then proceed with construction. Wolf said the company is “very, very anxious to continue with the development of that property.”

Wellington is a subsidiary of Triple Five Worldwide, a multinational real-estate development outfit with Las Vegas and Edmonton, Alberta, offices.

Chuck Foise, a Regal Financial Bank vice president, said issues related to the Park Pointe loan would be resolved in bankruptcy court.

City officials — by now accustomed to Park Pointe delays — said the bankruptcy filing nonetheless came as a surprise.

Major Development Review Team Manager Keith Niven said city officials remain interested in a development-rights swap to preserve Park Pointe. Despite the bankruptcy filing, Niven continued to work alongside King County planners to accommodate a development-rights swap, because “it’s so easy to get distracted by all of the drama associated with Park Pointe.”

Officials also entered discussions with developers to gauge interest in the Park Pointe land and a transfer of the development rights, known as a TDR. The swap between the Park Pointe owner and Issaquah Highlands developer Port Blakely Communities would leave the Tiger Mountain property undeveloped. Under the deal, additional houses would be built in the highlands instead.

Niven still planned to meet with King County planners to discuss whether the Urban Growth Boundary could be nudged outward to allow more houses to be built in the highlands.

Mayor Ava Frisinger said the effort to transfer development rights between Park Pointe and the highlands is the No. 1 priority for city officials.

“The issue is whether people will be able to buy it and make the TDR process work,” Frisinger said.

With the property mired in bankruptcy court, Frisinger said she hoped the developer or a new owner would consider the swap.

“We would be very happy if somebody were to buy that property and transfer the development rights,” she said.

Conservation groups also expressed interest in buying Park Pointe or a portion of the site in the past, but the cost was prohibitive.

While the developer and creditors wrangle in bankruptcy court, city officials will build the framework to transfer development rights if a new Park Pointe owner emerges.

“What it does, it definitely buys a lot more time to go through that process,” City Administrator Leon Kos said.

Kos said negotiators mentioned Chapter 11 as a possibility for the Park Pointe developer, but the option was considered so remote “that it dropped off the table.” Kos said predicting the future for the Park Pointe development would be difficult.

Even as the developer spiraled toward bankruptcy, consultants hired by the developer proceeded with the definitive environmental report about Park Pointe. The document was released Oct. 30, a week ahead of the scheduled foreclosure auction.

The environmental impact statement addressed concerns about storm water runoff from Park Pointe, as well as questions about whether vehicles would clog roads near the development.

Plans presented by the developer show Park Pointe with 251 units or 344 units. Under the first option, 251 residential units — 121 single-family attached units and 130 multifamily units — would be built on 14 acres of the lower slope. The larger option would include 59 single-family detached, 145 single-family attached and 140 multifamily units spread across the lower slope and a higher bench on the mountainside.

The developer had indicated a preference for the smaller option. But if city officials and the developer were unable agree to preserve the upper portion of the property, the developer would request the ability to develop the entire site. Conditions attached to development include the preservation of open space and efforts to encourage public transportation for residents.

But the project has been stalled for more than a decade, as citizens assailed the Park Pointe proposal, and city officials placed the land under more restrictive zoning and worked toward a development-rights transfer. A City Council decision last year to cancel the planned Southeast Bypass across Tiger Mountain dealt Park Pointe another blow. The long-planned roadway would have served the development.